INSIGHT
Just a few weeks before 2013 elections in Pakistan, the British lawmakers called on their government not to go ahead with a major increase in Pakistan’s financial aid unless Islamabad makes its wealthier class pay more taxes.
The British parliament’s International Development Committee called on Nawaz Sharif, who was set to win the elections, to prepare plans to tackle “rife” corruption and tax evasion.
“We cannot expect the people in the UK to pay taxes to improve education and health in Pakistan if the Pakistan’s elite is not paying income tax,” the committee said in a report then.
“Pakistan’s rich do not pay taxes and exhibit little interest in improving conditions and opportunities for Pakistan’s poor.”
According to that report, only 0.57 percent of Pakistanis paid income tax in 2011-12 and that no one has been prosecuted for income tax fraud for at least 25 years.
“We have made it clear to the government and opposition politicians in Pakistan that it is not sustainable for British taxpayers to fund development spending if Pakistan is not building up its own stable tax take,” a spokesman for the British development ministry was quoted as saying.
But if one looks at the startling disclosures made through the leaked documents of the Panamanian firm, Mossack Fonseca last week, one could say that the advice has fallen on deaf ears.
Around 200 rich families of Pakistan are revealed to have stashed away their fortunes in offshore companies in order to remain untaxed.
The list includes major political families as well as business tycoons and even a serving high court judge.
But the most prominent family among the list, for obvious reasons, is the family of Prime Minister Nawaz Sharif.
According to Mossack Fonseca data, Mariam Nawaz – considered political heir of the prime minister – as well as her two brothers – Hassan and Hussain – own at least three offshore holding companies registered in the British Virgin Islands.
These companies were said to be involved in purchase and mortgage of at least 13.8 million dollars in UK properties.
One of the holding companies also purchased another, Liberia-based, holding company for 11.2 million dollars in 2007 around the time when the family was returning to Pakistan after ending its eight years of exile-life in Saudi Arabia.
The information leaked by Mossack Fonseca about Sharif family has been appearing off and on, in bits and pieces, in the Pakistani media before, but it was often discounted as vilification campaign which politicians usually indulge in against their opponents.
But this time around, the information has come to the fore with undeniable facts and figures and not from a Pakistani source but from outside Pakistan.
Moreover, the information is not just restricted to Sharif family or just to Pakistan but it pertains to many powerful and rich families around the world.
The revelations have forced Iceland’s Prime Minister Sigmundur Gunnlaugsson to resign from office after he was found to have undeclared interest linked to his wife’s fortune, while British Prime Minister David Cameron has now also reluctantly admitted that he had owned shares in an offshore trust set up by his late father.
The disclosures by the Panamanian firm have posed a new political challenge to the PML-N government, though many people believe that it could easily ride through the crisis, as happened in the past too, as neither prime minister nor his brother and second-in-command, Shahbaz Sharif, were in any way found to be linked to any of these companies.
But it is not just a question of legality but that of morality too, though in the Land of Pure it rarely matters.
The troubling question for the prime minister is the demand by opposition for a probe into how this big fortune was amassed and whether any tax evasion was involved in the process.
Moreover, even if Sharif is legally cleared from all objections, there would still be some questions that warrant answers from him.
For example, how could the rulers expect the people to pay their taxes when their own scions skip the net.
Interestingly, when the PML-N government in the centre is struggling to cope with the fallout of the Panama papers, its provincial government in Punjab has launched a mass awareness campaign in the province to exhort people to pay their taxes.
“Pay your taxes to build a better Pakistan,” read a short message service sent to cellular phone subscribers throughout the province last week by the Punjab Revenue Authority.
The authority invited the people to join it in celebrating Tax Day on April 10 (yesterday) and offered “exciting prizes” to people if they send their restaurant bill to the authority.
In a country where less than a million people pay taxes, such a campaign to convince people to pay their taxes must be appreciated and supported.
But general people could only be convinced to pay their taxes faithfully and honestly, if they are sure that those asking them are also fulfilling their obligations in this regard.
The Panama papers have only reinforced the widely held perception in the country, where according to government’s own calculation every third person in its 180 million population is poor, it is only the underprivileged section of society, particularly salaried class, which is made to pay undue taxes while the affluent class finds plenty of ways to avoid being taxed.
Moreover, the government has long been saying that it badly needs private investment to prop up the country’s faltering economy, but what moral justification would it have now to make such a call, when the scions of the ruling family themselves are reluctant to bring in their money into the country.
Though use of tax havens is not totally unlawful, in the majority of cases, the rich and powerful use these havens by setting up offshore companies under fake names, by concealing the origin of the money and by avoiding tax on the money.
In case of the Sharif family, there was no bogus identity for the offshore companies linked to them, but questions are being asked about the sources of money, as according to them, these companies were set up during their time in exile in Saudi Arabia when they were “penniless”.
This case, on face value, does not involve any wrongdoing on the part of the elder Sharifs but their names would only be clear if a fair and impartial inquiry is conducted into the whole affair.
The prime minister has ordered setting up a commission comprising a retired judge to look into the issue.
The government has yet to announce the name of the retired judge who would hold the inquiry and the terms of reference to be set for him, but if one looks at the history of the judicial commissions formed in the country, one neither expects any earth-shaking probe nor any such finding or any action on it.
Once dust settles down, it is a widely held view that there will be business as usual in the country and it would again be the underprivileged segment of the society who would continue to bear the brunt of heavy taxes to let its rulers keep on ruling.
The writer is a senior journalist based in Islamabad
